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HMRC internal manual

International Manual

Controlled Foreign Companies: The CFC Charge Gateway Chapter 3 - Determining which (if any) of Chapters 4 to 8 apply: Does Chapter 4 apply?: HMRC Governance

If, having read this guidance and the guidance for Chapter 4 (see INTM200000), you believe that arrangements, in relation to UK activity, justify a challenge to a taxpayer’s view on whether, or the extent to which, a CFC’s profits pass through the gateway to be charged as Chapter 4 profits, you must contact the Base Protection Policy team in Business, Assets & International before you proceed with an enquiry.

It is expected that the application of the transfer pricing legislation and the question of whether any UK activity is carried out by a permanent establishment of the CFC will have been considered whilst considering whether a Chapter 4 challenge is appropriate.

Prior to contacting the Base Protection Policy team, you should have considered, at least, the following points:

  • What are the assets and risks in the CFC and the nature of the UK activity in relation to them;
  • why you consider that UK activity is under-rewarded;
  • why a transfer pricing adjustment will not remedy any under-reward to the UK;
  • why the UK activity does not lead to the CFC being treated as trading through a UK PE;
  • why you consider that none of the TIOPA10/S371CA conditions are met;
  • why the exclusions in Chapter 4 (see INTM200600) do not apply;
  • the estimated tax at risk from the arrangements that are in place between the UK company or companies and the CFC.